Unfinished Business…

Unfinished Business…

"And I sincerely believe with you, that banking establishments are more dangerous than standing armies; & that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

– Thomas Jefferson

“When we saw what happened in Parkland, we were so disturbed and upset.  We love these kids and their rallying cry, ‘Enough is enough.’ It got to us.” 

- Edward Stack, CEO Dick’s Sporting Goods

By J.M. Hamilton (3-4-2018)

This coming September 15, 2018 will mark the 10th anniversary of the Lehman event (to this day, the largest bankruptcy ever recorded).  

An event that many Americans will remember contributed to the largest bank bailout in the nation's history, the financial crisis, and the Great Recession.  The financial contagion was not confined to the U.S. but many countries throughout the West suffered from TBTF banks that were leveraged to the hilt, and gambling w/ depositor - and ultimately, taxpayer - money.  Economies have since healed to varying degrees, but not all have recovered (e.g. Greece and Italy), and arguably, none have fully recovered.

In fact, the bailouts continue to this very day... see the ECB and Federal Reserve's hyper accommodative monetary policies, where real yields over the last decade - adjusted for inflation - have often been negative or below 1%.  Basically providing banks a handout w/ free money, and transferring wealth from depositors to banks, shadow banking, and private equity.

Economist Paul Romer once famously said, "A crisis is a terrible thing to waste."  And the 2008 crisis was truly wasted.  Instead of taking time to analyze TBTF (too big to fail) banks, the casino atmosphere on Wall Street - backstopped by the American taxpayer, and the structural defects w/in our economy that have led to explosive wage & wealth inequality ... the entire crisis was papered over by Republican - and succeeding Democratic - administrations.  Congress - both parties - owned by the Wall Street banking oligopoly quickly fell into line, and voted for the bailout (but there was no such relief for 99%, especially on the scale banks received, and many people lost their homes and jobs).

Of course bank lobbyist today, w/ the crisis in the rearview mirror & banks making record profits, want to see most of the post-crisis reforms & regulations undone, particularly the Volcker Rule. The Volcker Rule, in lieu of the simple reinstatement of Glass-Steagall, sets limits on banks gambling w/ depositor money (as well as taxpayer money, as many bank deposits are federally insured).  And many of the pirates that ran these TBTF banks are still in charge of their respective institutions to this very day (see Messrs. Blankfein and Dimon).

Perhaps what was most remarkable about the bailout, however, was the argument put forth that these institutions were TBTF, and so critical to the American economy that there was no other recourse but to adopt the emergency measures that were passed.  Trillions - in an alphabet soup of programs (remember TARP?) and free Fed money - were thrown at these institutions.  And yet, no strings were attached to the bailout money.  The banks were so arrogant about both the crisis and the subsequent bailout that one CEO was reported to have said that the banks, leading up to the crisis, were merely: "... doing god's work."

Banks may not only be key to the American economy, but they are also central to the transmission of monetary policy, which given the sorry state of U.S. fiscal policy (now at record debt levels) is the only game in town.  And yet, these all important Wall Street banks are operated by a men's only club, who are restricted in their actions by: their bonus plan, the value of their respective bank’s stock, activist investors, and stock analyst buy & sell recommendations.  The CEOs of these major banks are highly political men, and certainly play no small role in the dispersion of campaign, PAC, lobbying, and dark money contributions. 

And given their awesome power, they can even make or break an economy - and an administration in power - by their collective action or inaction.

All of which begs the question:  Should institutions - w/ virtually no checks upon their power - have this degree of control over the economy, the government, and the political process?  Much has been made about the Russian hacking of the 2016 election, but how about the daily money-hack Wall Street lobbyist engage in w/ our elected politicians?  Does the House of Representatives dance for Putin, or do they dance for Wall Street bank executives?

Beyond breaking up TBTF institutions and - under the most optimistic scenario - reenacting Glass-Steagall, should such powerful institutions be allowed to exist in their present structure?  

To cut to the chase, should commercial lending institutions - given that they are the cornerstone of the economy & possess awesome power over the government - be operated as not-for-profit institutions?  If we drill down and are honest w/ ourselves, it was the fact that these institutions are - so concentrated, under tremendous pressure to make profits, and absolutely key, bank executive compensation incentives drives decision making that is often not in the best interests of the country - that directly led to the 2008 crisis.

Do we want the crooks in Congress running Wall Street commercial lending... absolutely NOT.  Does the private sector do many wonderful things?  

Answer: Absolutely, particularly in a functioning free market, w/ many competing entrants w/in a given market place or economic sector.  

But would the American economy - as well as the health of our democracy/republic - be better served by a Wall Street commercial lending group that was run as not-for-profits?    

JMH believes that case could easily be made for this manner of economic structural reform ...  Sure allow investment banks to continue to be operated by the profit motive (albeit no longer backstopped by the taxpayer, that is to say, federally insured).  Take away the profit motive, excessive Wall Street pay packages & incentives, the continual grind to push the stock price ever higher, and instead, incentivize not-for-profit, commercial lending banks to increase loan to deposit ratios, responsibly, at the lowest possible interest rate, w/out bankrupting the institution or shafting depositors. 

What U.S. citizens are likely to end up w/ is a much safer banking industry, a stronger economy, a better monetary policy conduit, and the end of future financial crisis (at least the end of financial crisis initiated by commercial lending institutions, as presently operated).

Then again, perhaps, the shifting of commercial lending from a for profit to a nonprofit model isn't necessary.  To hear BOE's Governor, Mr. Mark Carney, tell it last week, on Bloomberg Surveillance, cryptocurrency may ultimately eliminate banking intermediaries (aka the bankster middleman), altogether.  Hence, the rush to regulate cyber currency, and for banks to begin co-opting many cryptocurrency attributes.

JMH isn't the only person thinking not-for-profits are an excellent hedge against a corrupt U.S. government, or private sector excess.  Messrs. Bezos, Buffett, & Dimon have been talking about setting up not-for-profit healthcare for their employees, as a means to mitigate and possibly control ever spiraling healthcare costs. 

The not-for-profit model argues for maximum efficiency, while eliminating - or mitigating - cutthroat profit taking and government corruption.

It's as if many corporations - most recently - have taken Mr. Fink's (of BlackRock fame) advice to heart, and have opted not only to make money, but to act in a more socially responsible manner.  In some instances, CEOs are demonstrating leadership, where owned politicians fear tread.

Against the backdrop of the latest mass shooting, several corporations have stepped forward to either disassociate, if not outright cut ties with - the extremist & terrorist group - The NRA (the lobbying arm for the gun industry). 

These socially conscious businesses are to be commended, and further encouraged to take responsible action, and support politicians, who will - in turn - advance the same agenda. 

There are too many stories like the ones that ran on Disney last week. Namely, that while Disney is minting billions, many of its employees are living in cars. 

Might corporations and multinationals, given exceptional profits and low tax rates, begin to support a living wage and gender pay parity?  Some estimate that gender pay parity would add trillions to the global economy.

The bottom line is a company can enhance their bottom line by doing the right and socially responsible thing.  Just as there are boycotts, there are also buycotts, where consumers reward socially responsible companies by purchasing more of their product.

Isn’t that the way it should be?  Some might call this consumers voting w/ their purses and wallets.

Selah.

Copyright JM Hamilton Publishing 2018

Demagogue on Parade…

Demagogue on Parade…

Guard against the impostures of pretended patriotism.

-       George Washington

There are seasons in every country when noise and impudence pass current for worth; and in popular commotions especially, the clamors of interested and factious men are often mistaken for patriotism.

-       Alexander Hamilton

By J.M. Hamilton (2-17-2018)

The American people live in extraordinarily evil times, whereby our government has long ago stopped representing the people’s interests.

Instead, the majority of the economy’s sectors have been allowed – by our government – to metastasize into cartel and monopoly. 

In our current monopoly economy, both the consumer and labor are squeezed, via monopoly and monopsony power, respectively.  That is, w/out benefit of competition or the free movement of labor, business is able to set price – often making exceptional profits off the consumer – and able to dictate the price of labor, as they are the only game in town.  (If you think the national debt is a drag upon the economy & economic growth, think too, of the destabilizing impact a monopoly economy has upon our macro and growth fundamentals.)

Having an Oligarchy control the private sector is bad enough, but when an elite few co-opt and own the public sector as well, a safety valve is removed from the most predatory & virulent form of crony capitalism known to man.  That is, fiscal policy – in lieu of building roads and providing a safety net – has been captured to rob the Federal credit line and provide tax cuts for an elite few, or fund privatization schemes, whereby the taxpayer is scammed and robbed ad nauseam. 

Monetary policy too has been captured by the Wall Street banks, Shadow Banking, & the Private Equity barons.  And instead of being used for the common good, monetary policy has become yet another trickle-down vehicle, much like fiscal policy, whereby an elite few profit from inflated asset prices pumped up by the Federal Reserve (in the hopes that that inflated asset prices, and flush Wall Street banks, will allow a few crumbs to float down to the 99%).

Times are so grey, that entire industries - that should have already gone the way of the buggy whip – are sustained by the grace of a kleptocratic government.  JMH, of course, is writing about Big Coal & Big Oil.  U.S. government is so corrupt that antitrust laws are rarely enforced, and predatory utilities are allowed to charge outrageous fees for commodities that are anything but scarce, like Internet service providers and Big Pharma’s patented medicine trove.

But two industries, perhaps, stand above all others in the carnage and desolation that they spread: gun manufacturers and military contractors. 

The gun industry and its lobbyist, the NRA, have to answer for an ever-growing American body count, numbering in the thousands annually.  This week saw another mass killing at a Florida high school, and our purchased Congress failed the American people once again.

The reality is our Congress and President(s) – like vampires - are now bathed in countless victims' blood, cut down too early by military grade assault rifles, and in a hail of NRA sponsored lead.  And our, allegedly, democratic government, solely, is responsible for the carnage.  The Congress, which initiates legislation, is a complicit tool of the gun lobby, and continually fails to act to contain & control the death and rivers of blood.

No other country on the planet is responsible for, or suffers from, this level of mass shooting violence; no other country on the planet has a President, or Executive Branch leader, that obsesses about the stock market like ours does.  Of course, the stock market sadly explains why industries that should have already been liquidated are still around minting profits, while new technology is at the ready to render said industry obsolete.  As for guns, any leader – who had any sense of decency or knowledge of right & wrong – would demand a ban on assault rifle sales.

Crony capitalists – and Oligarchs - hate any disruptions to a never-ending stream of monopolistic profits, no matter how dated the industry, or the severity of the carnage and destruction wrought by said cartel (especially if the social costs of said deadly product are passed onto government & society).  The Oligarchy has no allegiance to nation-states, or its citizens; they only have allegiance to profits.

The ends justify the means, and the “ends” – our end – is blind idolatry of the stock market and the profits it affords the Oligarchy.

And therein lies the problem:  Our Commander in Chief is morally bankrupt, in way over his head, and entirely unfit for the job at hand.  He lies like he breathes air.  Like any demagogue he’s a great divider and superlative at stirring up his base; but when it comes to executing on his promises, he only delivers for his donors & plutocratic friends (which surprise, their interests do not align w/ the interests of: the nation, or Mr. Trump’s base, or the American people). 

Nobody believes the U.S. Chamber’s mantra anymore, that what is good for cartels, monopolies, and multinationals is good for Americans.

Scandal after scandal follows the man, and evangelicals and hanger-ons caudle our POTUS… to learn who can be the very best sycophant.  The GOP has given up any pretense of dignity and is now confirmed to be the retrograde party of homophobia, misogyny, murder, and racism (a few Dems, too, have played their part).

And so  - like the corruption surrounding ancient Rome itself -  there must be distractions, something to keep The People’s collective mind off the emperor’s ever growing list of scandals.  There must be bread and circuses to distract the vox populi from the reincarnation of Caligula, who now inhabits the Oval Office. 

And so, our Commander in Chief has called for a military parade. 

Now, military parades, generally, fall into two categories: as historically conducted in the U.S., they are often used to celebrate the conclusion of a successful military campaign or war.  Whereas in emerging markets - inhabited by authoritarian, or totalitarian dictators – military parades are often conducted out of fear… fear of the leadership’s inferiority, fear of foreign powers & outsiders, and even fear of the despot’s own people.  In the latter parades, the celebration – if any - is not about war’s end, but rather, to call attention to the preening peacock on the reviewing stand, the imperious head of state and the awesome power they wield.

Rather than celebrate war's end, military parades – conducted by authoritarians & totalitarians – put The People on notice: We are on a permanent war footing; the threat is both constant & real; and the deprivations and sacrifice you suffer – citizen – is because the world (or some foreign power) is against you and your family.  In these regimes, the media is often state controlled, so that there is one official narrative or party line.

For the dictatorial regime, guns & murder always come before butter, and the people often starve as a result.

Bread & Circuses or a Fear Based Totalitarian Cult?

Hmmm.  Which type of parade might Mr. Trump have in mind?

Last JMH checked, the most powerful nation on the earth – the last remaining superpower -  hasn’t won many wars as of late.  It's been widely noted, young U.S. soldiers fighting today in Afghanistan were in disposable diapers when the war began.  What does it say that the most powerful nation on earth can’t win a war against a ragtag resistance?  What does it say that the U.S. would be foolish enough to attempt a nation building exercise w/in the graveyard of empires?

Our defense contractors are one of the clearest examples of the abuses heaped upon the U.S. economy by cartels & monopolies: manufacturing products and services that don’t work; a perennial lack of innovation w/ military products designed to fight the last war; and always and forever, the ubiquitous cost over-runs.  Will Trump’s parade celebrate the MIC’s abundant failures?

Perhaps, Mr. Trump wants to celebrate our all volunteer fighting force, who – all too often - join the military in the hopes of ultimately being able to afford a college degree, w/out suffering a debtor's existence for life.  (Note, as reported in the Military Times, the soldiers who responded to a survey voted overwhelming against Mr. Trump’s proposed carnival).

Given how poorly paid our soldiers are, I’m sure they’d prefer a raise, instead of a parade.

Maybe Mr. Trump wants to call attention to the wholesale sellout of his campaign pledge to end failed nation building?  Mr. Trump wasn’t in office a full year before he let the generals con him into another Afghanistan surge.  Heh, but this time we’re going for the Big Win.

Right.  War has become just another profit center for the Kleptocracy, and if it bankrupts the nation so be it.

I know, we are celebrating our overextended military empire, consisting of 700 to 900 military bases scattered around the globe?  (While one in five U.S. children live in poverty.)

Perhaps it’s the fact that the last two Presidents ran on campaigns of ending wars, only to ramp up existing wars once in office.  So much for the foreign policy establishment’s worries about an isolationist POTUS Trump.

No.  At the end of the day – the parade Mr. Trump wants increasingly feels like the type of military parades authoritarians and totalitarians throw, and for the aforementioned reasons that dictators throw them (mainly out of fear; as a distraction; the Dear Leader's self-aggrandizement; and a reminder that the nation and the people are now on a permanent war footing).  Hence, the need to waste at least half of discretionary Federal spending on an un-auditable DoD/MIC, while children and families suffer austerity (and are crushed by an ever concentrated monopoly economy).  

Never mind that the terrorists shooting up the U.S. are typically white, male, American, and armed w/ military grade assault rifles.

What Mr. Trump seems to have forgotten, or yet to learn – many of our foreign policy experts & military leaders haven't learned either – is that there’s more to being a superpower than spending obscene amounts of money on offensive weapons systems that do not perform.

Maintaining superpower status requires a fiscally solvent government (not one that is indebted to its enemy, China).  Retaining a strong military means not letting generals, and military contractors (or alleged allies) dictate U.S. foreign policy, or engage the U.S. military in each & every provocation around the globe (contrived or real).  It means cutting and discarding the fraud & waste surrounding weapons systems – and military contractors – who consistently fail to deliver. 

Being a superpower requires a sound currency that is not manipulated by a Federal Reserve, manned by Wall Street banksters.  It means keeping a lid on wage and wealth inequality, and making sure the economy benefits all – not just an elite few – so that our military force has a continued and vested interest in fighting for this nation and her ideals.  (Moreover, it's in our national security interest to break up cartels, monopolies, and TBTF institutions, or when a monopoly or utility is important enough to maintain, carefully regulate said monopoly or utility.)

And speaking of ideals, a superpower that fails to live by its proclaimed democratic principles will eventually be hollowed out, chewed through w/ corruption and mismanagement… until ultimately, out of desperation & frustration, the voters adopt the ideals of authoritarians and despots (see the West’s growing right-wing populist revolt).

Finally, the nation needs to make sure that our troops receive adequate pay and services, and are treated w/ the greatest admiration and respect (no matter how sordid or vacuous the wars are they are forced to fight)… not trotted out as a performing circus for a Commander in Chief, who has more ethical problems than the nation can count.

Our founding fathers warned us about such characters…  men who wrapped themselves in flags and proclaimed themselves to be the sole arbiters of national patriotism.

But given that Emperor Trump is presently buck-naked, what else is there for him to wear but a flag, a parade, and pseudo-patriotism?

Copyright JM Hamilton Publishing 2018